It’s no secret that CDMOs have exploded over the past couple decades in the pharmaceutical industry, helping sponsor companies do what they do, better. CDMOs provide a wealth of talent, expertise, experience, and processes to help their client companies bring their ideas and new products to fruition. What stands at the middle of this nexus, and serves as the basis of success or failure, is the partnership between the two firms. When done well, a partnership is something that doesn’t just “exist,” but becomes an entity in its own right—one that requires proper care and nurturing to bring about the best from the relationship, rather than leaving the outcomes to chance.

The entrepreneur Ryonosoke Satoro once commented, “Individually we’re one drop, but together we’re an ocean.” I think this is an important observation. There’s an emergent property of partnerships—where the whole is greater than the sum of the parts of the partnerships. Just as one drop of ocean water doesn’t possess all the complexity and large-scale effects of the entirety of the ocean—such as tides, grand currents (e.g., the Gulf Stream), and so on—neither does one entity of a partnership have all the potential for increased scale and outcome structures of the partnership itself. In complexity science, this is known as “Emergence.”

Headwinds, challenges, and opportunities

One of the predominant headwinds for CDMOs and their client companies continues to be supply chain risks and shortages, including stock-outs and delays. These ongoing disruptions and slowdowns have material impact on production processes, and all support functions who rely on predictability of forecasts to stage and conduct their work. PricewaterhouseCoopers (PwC) observed in their “Global CDMO Study of Pharmaceutical Operations (2022)” that 37% of CDMOs offer end-to-end services, and 28% offer services across “small molecules, large molecules, and advanced therapies.” But this still leaves the corollary 72% who are servicing only one or two of these modalities, and that is requiring the client companies to have to shop the CDMOs to find the right fit for their products.

Another challenge that persists is the difficulty in finding (and retaining) skilled talent. I wrote about this in the February 2023 issue, and the “War for Talent” continues to be at the forefront of urgent headwinds within CDMO partnerships. Operations don’t happen without the right talent in the right roles, and contrary to the evangelistic claims, generative AI won’t solve this.

On the opportunities front, companies have been engaged in continuous improvement practices (e.g., lean, Six Sigma, etc.), as well as introducing technologies with which to innovate their systems and processes. Digitalization has been high profile in helping to modernize business practices, with a lot more focus recently. Pharmaceutical companies and CDMOs are actively working to integrate advanced digital manufacturing and analytical technologies to their portfolio of offerings, to help stabilize and optimize their production processes.

Forecasts

For the industry as a whole, the future is bright. Despite challenges that have impinged upon world financial markets for over a year, fiscal policies and monetary policies (and their dramatic impacts on the industry), and tightening budgets, the consumer demand for safe and effective medicines not only continues to be strong—but continues to grow.

Research and Markets reports on the CDMO market being a $135.9 billion segment last year, and estimates of the compound annual growth rate (CAGR) hover in the range of 6% to 7.3% until 2030, which would place the market at around $235+ billion over the next 7 years. Active pharmaceutical ingredients (APIs) have—and will likely continue to have—the largest revenue share of the CDMO market, as their client companies pursue formulated drug product to satisfy the market.

The “trust” part of the equation

Trust in partnerships is not an easy thing to cultivate, and some organizations don’t actively nurture the sociopsychological partnership aspects specifically, instead letting the business outcomes satisfy the clients. But this leaves a lot of uncertainties on the table and unaddressed, because the partnership itself as I’ve mentioned above is a categorical variable that needs its own attention in order to optimize it for the betterment of all participants in the relationship.

Good communication takes effort, and relationships can’t thrive without communication. Author and entrepreneur Napoleon Hill observed that, “It’s literally true that you can succeed best and quickest by helping others to succeed.” CDMOs exist in a symbiosis with sponsor companies, and their services help the client in a synergistic way. This virtuous cycle helps both sides of the industry to be better—and both should be optimizing in parallel paths, to get better together. 

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Ben Locwin is a healthcare executive and has served on scientific and regulatory committees and panels, and been involved in the design, development, and commercialization of medical therapies for over two decades.